SECOND DIVISION

[G.R. No. 204702. January 14, 2015.]

RICARDO C. HONRADO, petitioner, vs. GMA NETWORK FILMS,

INC., respondent.

DECISION

CARPIO, J : p

The Case
We review 1 the Decision 2 of the Court of Appeals (CA) ordering petitioner
Ricardo C. Honrado (petitioner) to pay a sum of money to respondent GMA
Network Films, Inc. for breach of contract and breach of trust.
The Facts

On 11 December 1998, respondent GMA Network Films, Inc. (GMA Films)

entered into a "TV Rights Agreement" (Agreement) with petitioner under which
petitioner, as licensor of 36 films, granted to GMA Films, for a fee of P60.75
million, the exclusive right to telecast the 36 films for a period of three years.
Under Paragraph 3 of the Agreement, the parties agreed that "all betacam
copies of the [films] should pass through broadcast quality test conducted by
GMA-7," the TV station operated by GMA Network, Inc. (GMA Network), an
affiliate of GMA Films. The parties also agreed to submit the films for review by
the Movie and Television Review and Classification Board (MTRCB) and
stipulated on the remedies in the event that MTRCB bans the telecasting of any
of the films (Paragraph 4): EASIHa

The PROGRAMME TITLES listed above shall be subject to

approval by the Movie and Television Review and Classification Board
(MTRCB) and, in the event of disapproval, LICENSOR [Petitioner] will
either replace the censored PROGRAMME TITLES with another title
which is mutually acceptable to both parties or, failure to do such, a
proportionate reduction from the total price shall either be deducted or
refunded whichever is the case by the LICENSOR OR LICENSEE [GMA
Films]. 3 (Emphasis supplied)

Two of the films covered by the Agreement were Evangeline Katorse and
Bubot for which GMA Films paid P1.5 million each.
In 2003, GMA Films sued petitioner in the Regional Trial Court of Quezon
City (trial court) to collect P1.6 million representing the fee it paid for
Evangeline Katorse (P1.5 million) and a portion of the fee it paid for Bubot
(P350,000). 4 GMA Films alleged that it rejected Evangeline Katorse because
"its running time was too short for telecast" 5 and petitioner only remitted
P900,000 to the owner of Bubot (Juanita Alano [Alano]), keeping for himself the
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 balance of P350,000. GMA Films prayed for the return of such amount on the
theory that an implied trust arose between the parties as petitioner fraudulently
kept it for himself. 6 HDICSa

Petitioner denied liability, counter-alleging that after GMA Films rejected

Evangeline Katorse, he replaced it with another film, Winasak na Pangarap,
which GMA Films accepted. As proof of such acceptance, petitioner invoked a
certification of GMA Network, dated 30 March 1999, attesting that such film "is
of good broadcast quality" 7 (Film Certification). Regarding the fee GMA Films
paid for Bubot, petitioner alleged that he had settled his obligation to Alano.
Alternatively, petitioner alleged that GMA Films, being a stranger to the
contracts he entered into with the owners of the films in question, has no
personality to question his compliance with the terms of such contracts.
Petitioner counterclaimed for attorney's fees.
The Ruling of the Trial Court
The trial court dismissed GMA Films' complaint and, finding merit in
petitioner's counterclaim, ordered GMA Films to pay attorney's fees (P100,000).
The trial court gave credence to petitioner's defense that he replaced
Evangeline Katorse with Winasak na Pangarap. On the disposal of the fee GMA
Films paid for Bubot, the trial court rejected GMA Films' theory of implied trust,
finding insufficient GMA Films' proof that petitioner pocketed any portion of the
fee in question.
GMA Films appealed to the CA.

The Ruling of the Court of Appeals

The CA granted GMA Films' appeal, set aside the trial court's ruling, and
ordered respondent to pay GMA Films P2 million 8 as principal obligation with
12% annual interest, exemplary damages (P100,000), attorney's fees
(P200,000), litigation expenses (P100,000) and the costs. Brushing aside the
trial court's appreciation of the evidence, the CA found that (1) GMA Films was
authorized under Paragraph 4 of the Agreement to reject Evangeline Katorse,
and (2) GMA Films never accepted Winasak na Pangarap as replacement
because it was a "bold" film. 9 ADcEST

On petitioner's liability for the fee GMA Films paid for Bubot, the CA
sustained GMA Films' contention that petitioner was under obligation to turn
over to the film owners the full amount GMA Films paid for the films as
"nowhere in the TV Rights Agreement does it provide that the licensor is
entitled to any commission . . . [hence] . . . [petitioner] Honrado cannot claim
any portion of the purchase price paid for by . . . GMA Films." 10 The CA
concluded that petitioner's retention of a portion of the fee for Bubot gave rise
to an implied trust between him and GMA Films, obligating petitioner, as
trustee, to return to GMA Films, as beneficiary, the amount claimed by the
latter.
Hence, this petition. Petitioner prays for the reinstatement of the trial
court's ruling while GMA Films attacks the petition for lack of merit.
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 The Issue
The question is whether the CA erred in finding petitioner liable for breach
of the Agreement and breach of trust. cSaCDT

The Ruling of the Court

We grant the petition. We find GMA Films' complaint without merit and
accordingly reinstate the trial court's ruling dismissing it with the modification
that the award of attorney's fees is deleted.
Petitioner Committed No Breach of Contract or Trust
MTRCB Disapproval the Stipulated
Basis for Film Replacement
The parties do not quarrel on the meaning of Paragraph 4 of the
Agreement which states:
The PROGRAMME TITLES listed [in the Agreement] . . . shall be
subject to approval by the Movie and Television Review and
Classification Board (MTRCB) and, in the event of disapproval,
LICENSOR [Petitioner] will either replace the censored PROGRAMME
TITLES with another title which is mutually acceptable to both parties
or, failure to do such, a proportionate reduction from the total price
shall either be deducted or refunded whichever is the case by the
LICENSOR OR LICENSEE [GMA Films]. 11 (Emphasis supplied)

Under this stipulation, what triggers the rejection and replacement of any
film listed in the Agreement is the "disapproval" of its telecasting by MTRCB.
Nor is there any dispute that GMA Films rejected Evangeline Katorse not
because it was disapproved by MTRCB but because the film's total running time
was too short for telecast (undertime). Instead of rejecting GMA Films' demand
for falling outside of the terms of Paragraph 4, petitioner voluntarily acceded to
it and replaced such film with Winasak na Pangarap. What is disputed is
whether GMA Films accepted the replacement film offered by petitioner. aSECAD

Petitioner maintains that the Film Certification issued by GMA Network

attesting to the "good broadcast quality" of Winasak na Pangarap amounted to
GMA Films' acceptance of such film. On the other hand, GMA Films insists that
such clearance pertained only to the technical quality of the film but not to its
content which it rejected because it found the film as "bomba" (bold). 12 The
CA, working under the assumption that the ground GMA Films invoked to reject
Winasak na Pangarap was sanctioned under the Agreement, found merit in the
latter's claim. We hold that regardless of the import of the Film Certification,
GMA Films' rejection of Winasak na Pangarap finds no basis in the Agreement.

In terms devoid of any ambiguity, Paragraph 4 of the Agreement requires

the intervention of MTRCB, the state censor, before GMA Films can reject a film
and require its replacement. Specifically, Paragraph 4 requires that MTRCB,
after reviewing a film listed in the Agreement, disapprove or X-rate it for
telecasting. GMA Films does not allege, and we find no proof on record
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 indicating, that MTRCB reviewed Winasak na Pangarap and X-rated it. Indeed,
GMA Films' own witness, Jose Marie Abacan (Abacan), then Vice-President for
Program Management of GMA Network, testified during trial that it was GMA
Network which rejected Winasak na Pangarap because the latter considered the
film "bomba." 13 In doing so, GMA Network went beyond its assigned role under
the Agreement of screening films to test their broadcast quality and assumed
the function of MTRCB to evaluate the films for the propriety of their content.
This runs counter to the clear terms of Paragraphs 3 and 4 of the Agreement.

Disposal of the Fees Paid to

Petitioner Outside of the Terms
of the Agreement
GMA Films also seeks refund for the balance of the fees it paid to
petitioner for Bubot which petitioner allegedly failed to turn-over to the film's
owner, Alano. 14 Implicit in GMA Films' claim is the theory that the Agreement
obliges petitioner to give to the film owners the entire amount he received from
GMA Films and that his failure to do so gave rise to an implied trust, obliging
petitioner to hold whatever amount he kept in trust for GMA Films. The CA
sustained GMA Films' interpretation, noting that the Agreement "does not
provide that the licensor is entitled to any commission." 15
This is error. HcSaTI

The Agreement, as its full title denotes ("TV Rights Agreement"), is a

licensing contract, the essence of which is the transfer by the licensor
(petitioner) to the licensee (GMA Films), for a fee, of the exclusive right to
telecast the films listed in the Agreement. Stipulations for payment of
"commission" to the licensor is incongruous to the nature of such contracts
unless the licensor merely acted as agent of the film owners. Nowhere in the
Agreement, however, did the parties stipulate that petitioner signed the
contract in such capacity. On the contrary, the Agreement repeatedly refers to
petitioner as "licensor" and GMA Films as "licensee." Nor did the parties
stipulate that the fees paid by GMA Films for the films listed in the Agreement
will be turned over by petitioner to the film owners. Instead, the Agreement
merely provided that the total fees will be paid in three installments (Paragraph
3). 16

We entertain no doubt that petitioner forged separate contractual

arrangements with the owners of the films listed in the Agreement, spelling out
the terms of payment to the latter. Whether or not petitioner complied with
these terms, however, is a matter to which GMA Films holds absolutely no
interest. Being a stranger to such arrangements, GMA Films is no more entitled
to complain of any breach by petitioner of his contracts with the film owners
than the film owners are for any breach by GMA Films of its Agreement with
petitioner.
We find it unnecessary to pass upon the question whether an implied trust
arose between the parties, as held by the CA. Such conclusion was grounded on
the erroneous assumption that GMA Films holds an interest in the disposition of
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 the licensing fees it paid to petitioner.
Award of Attorney's Fees to Petitioner Improper
The trial court awarded attorney's fees to petitioner as it "deemed it just
and reasonable" 17 to do so, using the amount provided by petitioner on the
witness stand (P100,000). Undoubtedly, attorney's fees may be awarded if the
trial court "deems it just and equitable." 18 Such ground, however, must be fully
elaborated in the body of the ruling. 19 Its mere invocation, without more,
negates the nature of attorney's fees as a form of actual damages. DISEaC

WHEREFORE, we GRANT the petition. The Decision, dated 30 April 2012

and Resolution, dated 19 November 2012, of the Court of Appeals are SET
ASIDE. The Decision, dated 5 December 2008, of the Regional Trial Court of
Quezon City (Branch 223) is REINSTATED with the MODIFICATION that the
award of attorney's fees is DELETED.
SO ORDERED.
*
Velasco, Jr., Del Castillo, Mendoza and Leonen, JJ., concur.

Footnotes
* Designated Acting Member per Special Order No. 1910 dated 12 January 2015.

1. Under Rule 45 of the 1997 Rules of Civil Procedure.

2. Dated 30 April 2012 and penned by Associate Justice Stephen C. Cruz, with
Associate Justices Vicente S.E. Veloso and Angelita A. Gacutan concurring.
The Resolution of 19 November 2012 denied reconsideration.

3. Records, p. 11.
4. In its Memorandum, GMA Films increased this amount to P750,000.
5. Records, p. 5.

6. Invoking Article 1456 of the Civil Code ("If property is acquired through mistake
or fraud, the person obtaining it is, by force of law, considered a trustee of an
implied trust for the benefit of the person from whom the property comes.")
7. Records, p. 82.

8. The CA sustained the increased amount (P750,000) demanded by GMA Films for
Bubot (see note 3), which, together with the demand for the refund for
Evangeline Katorse (P1.25 million), totals P2 million.
9. Rollo , p. 29.
10. Id. at 31-32.

11. Supra note 3.

12. TSN (Jose Marie Abacan), 20 February 2008, p. 15.

13. Abacan testified (id. at 14-15):

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 Q [Atty. Estoesta]: Now, can you please tell us Mr. Abacan what was the reason
why the said film of Winasak na Pangarap was not accepted by GMA
Network?
A: Sir, bomba eh.

Q: When you say bomba, Mr. Abacan, what do you mean?

A: It is something that you cannot really — the material presented is not
something that you can really air on television because of the censorship
problem . . . . (Italicization in the original; boldfacing supplied)

14. The amount demanded increased from P350,000 as stated in GMA Films'
complaint to P750,000 as alleged in its memorandum before the trial court.
15. Rollo , p. 31.
16. This provides:

TERMS OF PAYMENT
60,750,000 payable as follows:
30% (18,225,000) Dec. 23, 1998 (downpayment)
30% (18,225,000) March 23, 1999 (w/post-dated check)

40% (24,000,000) June 23, 1999 (w/post-dated check)

30% downpayment will only be released on December 23, 1998 upon submission
of:

a) all betacam copies of the above-listed titles which should pass through
broadcast quality test conducted by GMA-7, and b) all relevant authorities to
sell from producers. (Records, p. 11)
17. Id. at 328.

18. Article 2208(11), Civil Code.

19. Scott Consultants & Resources Dev't. Corp., Inc. v. Court of Appeals, 312 Phil.
466, 481 (1995).

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